Hints on short-term investing

 

            Points from short-term gurus

 

·        Develop a trading system that fits your personality, your skill and your timing available for trading. A beginner’s trading system is different from a skilled trader’s system.

·        Start with two or three technical indicators and learn thoroughly how to use them. Short-term trading should emphasize on price movements more than fundamentals.

·        Even with a win-loss ratio of 50%, you still can make a lot of money by protecting your portfolio with stop loss and your profits with trailing stops. Define and enforce your exit strategy.

·        Knowledge is everything, and hence learn from the best traders. There are schools (some on-line) teaching folks how to trade. It is less expensive than paying your tuition via actual trading. This book and most other books are a good start and most cost effective.

·        Beginners cannot beat professionals without luck. You do not gain knowledge by paper trading. Start small. Never risk the money you cannot afford to lose.

·        Need basic capital for trading and a laptop to start. Plus living expenses for a few months if you trade full time. Prepare your new venture psychologically. Be emotionally detached in investing. Silence is golden, the rule I just violated. Your friends will not share their wins but blames, and it affects your ego and your trading.

I know many made so much in 2000 and in early 2021 that they quitted their day jobs, and then they found out they had big losses later.

·         Diversify but not over-diversify. Most of us can handle about three trades simultaneously, or more if your holding period is longer than a day.

·         When the number of new heights exceeds the new lows by a large margin (determine it yourself as all markets are different), consider sell (the market could be peaking). Sell short vice versa.

·        When you have three unsuccessful trades in a row, it is time to take a break and/or switch to paper trading. Better double your bet on winning stocks, and not the other way round.

·        Record all your trades and the results in a trade journal. Review it and learn from your successes and losses periodically.

Modify your trade system according to your gained knowledge and the market trend. Test it out with no or minimum money until you are comfortable.